Analyzing Yang Zijiang Financial Holdings' Full-Year Results for 2022
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Chart 1: Yzjfin daily and weekly charts (since IPO late Apr 2022)
Singapore-listed company Yang Zijiang Financial Holdings recently released their full-year results for 2022, revealing a 20% drop in total income to $306 million and a 50% decline in net profit to $162 million. The decrease in net profit was due to higher-than-expected credit losses and allowances of $135 million, mainly from debt investments made in the real estate sector, which was hit hard by the worsening real estate industry in China. The real estate sector accounts for approximately 56% of total provisions.
Despite this, the company believes that the worst of the real estate challenges may be over, with China reopening and a new and reformed government in place. The Chinese authorities have relaxed COVID-19 management measures, which have improved economic sentiment, and have released measures to support the local real estate sector, including a liquidity package in November 2022.
However, one of the key considerations for the company's performance and profit in FY2023 will be whether there will be an increase in their non-performing loans and whether they can claw back these provisions will be a key consideration for the company's performance and profit in FY2023. Their non-performing loan ratio stood at 41% at the end of 2022, up significantly from 16% in 2021. Nonetheless, the company is conservative with its non-performing loan classification and believes that they can claw back some of these provisions.
In Conclusion
At a current price-to-book ratio of 0.36 times (at 38 cents), the recent performance may have been already priced-in. Despite the unfavorable full-year results, the dividend yield of 4.7% remained attractive to investors (Yzjfin proposes a 43% payout ratio that exceeds its previous guidance of a 40% payout ratio). While the company's full-year results for 2022 were not favorable, their cautious optimism towards the real estate market in China may present potential opportunities for investors should the economy (in particular the real estate sector) of China staged a successful turnaround.
note: Concensus price target at 64 cents representing about 68% above current price of 38 cents as of this writing.
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